Black Mamba
Member
Come on man, they don't pay taxes today, we're not unburdening them with your proposal.
Are you arguing for the sake of arguing?
huh? I'm just referring to people not having to file today under the current system. You act like it's some hard thing to figure out. Most people who don't have to file know it.
I don't think I do, I used to run a business in a country that had VAT, and I also know what's it's like to be in an industry when the only way you can keep your prices competitive is to avoid paying VAT (which is pretty much what everyone did on every cash transaction, if you want to talk about "market distortions").
But more importantly, regardless of the amount of the increase, can we agree that your plan will increase the compliance burden for businesses?
So please, let put the "VAT will reduce the compliance burden" argument to bed, okay?
Of course, that's one of the downsides of a sales tax (cash sales). California has sales taxes and my family had a business, so I'm directly knowledge in cash sales. But do you report your gambling wins on your income taxes? Maybe you won a gift card in a contest. Did you report that?
Both income taxes and sales taxes has tax evasion by omitting information.
The amount of compliance increase for businesses is much less than reducing it on households, though. It's truly not even in the same realm. And only small businesses have the luxury of those types of tax evasions, Best Buy does not.
edit: Regarding compliance, income taxes involve depreciation which is far tougher to anything a consumption tax does.
First of all, I think we should encourage spending, not savings.
Do you support deflation too?
That encourages savings more than anything.
A less nice way of saying the exact same thing is that it discourage consumption, and consumption is an economically positive activity.
We need to encourage spending in this economy because we have a Demand problem. But remember, this is an issue now because people didn't save enough to begin with and are trying to fix their balance sheets. Furthermore, the consumption problem is a disposable income problem, not a people are saving too much problem.
Saving is a MASSIVE problem in this country and we didn't do enough of it. We should have discouraged consumption years ago and we're partly in this mess because we didn't. Balance sheets got so out of whack.
Also, your deflation comment is nonsense. because I think we save too little in this country doesn't mean I support deflation. That would be me arguing that if you like consumption so much, you support massive personal debt.
I also don't accept your assertion that income tax reduces economic output more than VAT.
On a macro level, they're the same, either people have less money to spend or things cost more, what's the difference?
Did you click the study I gave? there's empirical evidence of it, it's not like it's something made up.
There is a difference. As I already explained, your behavior changes based on how taxes are done.
Do you understand that a payroll tax and an income tax are identical? They're both income taxes. However, payroll taxes have been sold as an "investment" on your future. This little thing has changed the way the labor market works. Income taxes are mostly a result of employers having to raise wages to compensate (not 100%, but most of it). meanwhile, payroll taxes are pretty much entirely put on the worker in the form of lowered wages (except minimum wage earners of course) because of the "investment" gimmick. If you were to eliminate the payroll tax and incorporate it into higher income tax rates, employers would respond by raising wages because the worker would no longer associate their SS and Medicare directly to a tax and would demand higher wages to compensate for higher taxes (and yes, there is empirical data showing this).
How you tax DOES matter. it affects the behavior of people. You ask what difference is it if people have less money or things cost more and the answer is "all the difference in the world." People react differently to things which should give the same outcome. Now, you look at it from some perspective in a vacuum and think it shouldn't matter, but humans are very fickle. Our thought processes are not entirely rational, we are not the type of people to sit down and work all this out.
I'll ask another question. What if the gov't didn't withhold your taxes from your paycheck but your income taxes saw no changes otherwise? Would the behavior of people change?
the answer is obviously yes
And you didn't answer my gas tax question.